Brightcove’s Planned IPO: The Trade Press Reaction

Yesterday online video platform Brightcove filed an S-1 announcing it will offer 5 million shares at $10 to $12, which could raise up to $60 million for the company, which the New York Times say would make Brightcove worth $290 million . The video industry trade press was out in force of course – here are some of the highlights:

StreamingMedia’s Dan Rayburn started out his piece on Brightcove by taking a swipe at how the rest of the industry was covering the story:

While I saw lots of folks repeating the highlights from the filing in their blog posts and simply cutting and pasting the numbers, I didn’t see anyone asking the questions that have yet to be answered regarding Brightcove’s revenue or the size of the market they are in. It’s also clear that many folks only read the first few pages to the filing and not the whole document as their are lots of data points that gives one a lot to think about, and question. It’s just another example of many showing that too many blogs only care about publishing as many 500 word posts as possible in one day, rather than actually telling a story, engaging a reader, or trying to explain the impact a company could have on the broader market.

Agreed. Although the sites I really hate are the ones that don’t even bother to write their own stuff and instead concoct lazy ‘press reaction’ stories where they steal quotes from other sites and just bolt on a pithy critique. Pathetic.

Anyway, after rubbishing the rest of the competition, the stage was set for Rayburn’s own analysis:

But the real question is what’s the breakdown of Brightcove’s revenue and how much of it comes directly from their SaaS business? Through Brightcove’s CDN partners like Limelight Networks and Akamai, almost 9 billion streams went through Brightcove’s platform last year. That’s a lot of bits and since the delivery of those videos are handled by a third party, Brightcove pays the CDNs for those delivery services and marks up the bandwidth to their customers. So one has to wonder what percentage of Brightcove’s total revenue comes from the re-sale of bandwidth? Brightcove doesn’t break that number out in their filing and the company told me their could not comment on those details when asked.

While there is nothing wrong with some of Brigthcove’s revenue coming from bandwidth, considering that the average cost per GB delivered drops at least 20-25% each year, there is only so much of a markup Brightcove can add on top of what they pay the CDNs. Some have told me that it really does not matter as the percentage of Brightcove’s revenue that comes from the re-sale of bandwidth continues to decline each year, but that’s a bad answer. Just because it is declining doesn’t mean the number isn’t material. I don’t know what percentage of their revenue is from bandwidth and I won’t put a number out there as it would be a complete guess on my part. But if the number was low, think single digits, then my guess is that Brightcove would be all too happy to say what it is.

First Rayburn starts wondering what percentage of Brightcove’s revenue comes from bandwidth. Then he says he couldn’t possibly make a guess. But he is willing to guess that Brightcove would be willing to talk about the figure if it was in single digits. Suddenly those factual 500 word posts make a lot of sense.

In fairness to Rayburn, the article improves a great deal from that point on when he goes on to talk far more sensibly about Brightcove’s customer base and its history of leadership in the market – worth a read and he did manage to provide a more analysis than anyone else.

Considering the increasing importance and mainstreaming of cloud storage and digital video separately, Brightcove would seem have certain obvious advantages of being in the right space at the right time. But there are a lot of other companies betting on powering video that is not bounded by a particular device (i.e., the PC vs. mobile vs. TV) and is instead managed across a variety of technologies and outlets.

Brightcove’s head start in the cross-platform video delivery space is a major plus. But the revenues in that area are still relatively thin. But at a time when the economy is looking a little better, tech investors may find that they’re willing to go along with Brightcove, even if it can’t quite captivate the market like Facebook can. The good news is, it doesn’t have to come close. But it does have to do better than it’s done so far.